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Enhancement of Euronext’s post-Brexit strategic positioning as an open and international venue

Closing expected in Q1 2018, subject to regulatory approvals

Transaction to deliver significant value creation:

Strong core growth for ISE complemented by additional growth opportunities for the combined group and €6m of expected pre-tax run-rate cost synergies

Strengthening of Euronext’s revenue profile with the addition of leading global franchises in debt, funds and ETF listings

Expected return on capital employed above cost of capital within year three, in line with Euronext disciplined M&A approach, and EPS accretive from year one

Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext said: “The Irish Stock Exchange joining Euronext represents a major milestone in the expansion of Euronext’s federal model since its IPO. ISE brings to Euronext leading global positions in debt, funds and ETF listings markets. As part of Euronext, ISE’s growth initiatives will be reinforced with Euronext’s full support. We are delighted to welcome Deirdre Somers and her team to Euronext. In addition to strengthening revenue profile and cost synergies, ISE is ideally positioned to benefit from market opportunities in a post-Brexit environment. Within this environment, our unique federal model clearly demonstrates its added value through a single cross-country liquidity pool, a single state-of-the-art proprietary technology, a single rule book and a complete and diversified set of services, while maintaining strong local input within our balanced federal governance. This transaction demonstrates the strength of the Euronext “united in diversity” federal model.”

Deirdre Somers, Chief Executive Officer of ISE commented: ”This is a landmark day in the 224-year history of ISE and a great day for our customers and our people. This transaction recognises the significant value and leading market position that has been built by the ISE. More importantly, we believe that Euronext is the perfect partner to enable us to achieve our growth ambitions. Euronext is hugely complementary to the ISE, bringing valuable expertise, financial strength, global relationships and technological capability as well as a global brand. These will enable our business to build further on its track record of international achievement and capitalise on new market and product opportunities emerging in Europe.”

Euronext expands its federal model with the acquisition of the Irish Stock Exchange

A strategic venue to join Euronext’s federal model

Headquartered in Dublin, ISE is Ireland’s incumbent stock exchange operator and a global leader in the listing of debt and funds securities. ISE is the first pool of liquidity for Irish equities (51 listed companies, c. €122bn total domestic equity market capitalisation[3]), the first debt listing venue globally (30,000+ securities and listings1 from 90 countries) and the first fund listing venue globally (5,242 Investment Funds Securities and 227 ETFs1).

ISE generated revenue of €29.4m, EBITDA of €9.6m and a net income of €8.0m in 2016. For the first 9 months of 2017, ISE generated €24.2m of revenue, up +13.3% compared to the same period in 2016, and an EBITDA of €8.5m, up +22.4% compared to the same period in 2016.

The combined group pro forma 9 months of 2017 revenue would amount to €416.9m and an EBITDA of €227.7m before synergies.

ISE to join Euronext’s federal model for further growth opportunities and increased efficiency

The transaction brings together two highly complementary businesses with significant growth opportunities and expands Euronext’s federal model to a new attractive European country. It creates a leading global player in debt and fund listings, combining the listing expertise of ISE with the traded markets expertise of Euronext.

Euronext will benefit from ISE’s leading global positions in debt and fund listings as well as its unique product and listing expertise. The acquisition will also enhance Euronext’s growth outlook thanks to ISE’s embedded core businesses’ growth, complemented by the additional strategic growth plans for ISE, which will be reinforced with the full support of Euronext.

Ideal positioning of ISE in a dynamic environment, to take advantage of post-Brexit opportunities

The acquisition of ISE by Euronext, combined with Ireland’s very competitive economic environment, will further strengthen Ireland’s position as a strong European anchor to take advantage of Brexit opportunities. This transaction will also develop the Irish capital markets ecosystem within a European context and as part of Euronext’s core mission to power the real economy.

ISE is at the centre of Ireland’s highly competitive financial ecosystem. The country provides a recognized finance-friendly environment, with a highly educated workforce, and a business-oriented mind-set, as well as an attractive economy within the Eurozone, with forecast GDP growth of c.3.8%[4] 2017e-18e. Ireland is in a strong position to seize opportunities arising from Brexit since it is both close to the UK business culture and strongly rooted inside the Eurozone.

Dublin will have a strong group-wide position within Euronext’s highly inclusive federal governance structure, notably as the global centre of excellence for all Euronext’s group-wide activities in the listing of debt, funds and ETF securities.

ISE will then benefit from a strong European anchor to support and develop the Irish listed companies’ ecosystem within a European context and as part of Euronext’s core mission to power the real economy.

Padraic O’Connor, Chairman (Non-Executive) of ISE will be proposed as a new member of Euronext’s Supervisory Board to the next Annual General Meeting of Euronext.

In addition, ISE’s regulator, the Central Bank of Ireland, is expected to join Euronext’s College of Regulators.

A stronger future for ISE within the Euronext federal model

Euronext will provide ISE with its traded markets expertise, large customer base, state-of-the-art proprietary technology and widespread distribution channels, as well as a full suite of pre and post listing services to ISE equity issuers.

The combination will increase liquidity and efficiency for issuers, members and listing customers through the integration of ISE members to Euronext’s trading platform. ISE’s additional incremental growth opportunities include:

Leverage the unique complementarity of the Irish market to the UK to deliver Brexit solutions

Combine ISE’s global position in debt listing with Euronext Synapse as a catalyst for future fixed income innovation

Increased efficiency thanks to integration of ISE within Euronext

The transaction is financially compelling for Euronext’s shareholders with recurring EPS accretion in the first year and return on capital employed above Euronext’s cost of capital within year three.

The integration of ISE within Euronext is expected to generate run-rate pre-tax operating cost synergies of €6m per annum, to be fully delivered in 2020, primarily driven by i/ the migration to OptiqTM, Euronext’s new state-of-the-art proprietary trading platform, ii/ the aggregation of a Pan-European offering on market data by migrating ISE’s current offering onto Euronext’s platform and iii/ ISE benefiting from using Euronext’s support functions.

As part of the integration, total costs of c.€9m will be incurred in the first years of implementation, with full integration expected by 2020.

Continued financial discipline while optimising balance sheet structure of Euronext

This acquisition is part of Euronext’s strategy to actively leverage its balance sheet, while retaining financial flexibility, to capture value accretive opportunities and accelerate growth and strengthen its revenue profile.

Euronext is to pay for 100 % of ISE’s shares €137 million of enterprise value on a debt free, cash free basis, and excluding existing regulatory capital requirements (estimated at €21.8m). The transaction will be fully funded by debt.

As a reminder, as of 30 September 2017, Euronext had cash and cash equivalents of €140.6m, and €164.7m of outstanding long-term debt and strong liquidity through an undrawn Revolving Credit Facility of €250m.

Transaction timetable and requirements

ISE is currently owned by five Irish financial institutions, J&E Davy, Goodbody Stockbrokers, Investec Capital & Investments, Cantor Fitzgerald and Campbell O’Connor that have all committed to sell their shares.

The transaction is subject to regulatory approvals and is expected to close in Q1 2018.